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The 27 agree to require apps like Uber or Airbnb to declare VAT

by AI | 05.Nov 2024 | Europe in brief AI

Spain will implement the measure before 2028 although it will not be mandatory until 2030

Image of a mobile phone with the Uber app and a taxi in the background, on the day the decree to regulate VTC in Andalusia will be approved. On September 27, 2022, in Seville (Andalusia, Spain). Photo: María José López / Europa Press

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Brussels – The EU Economy Ministers adopted on Tuesday the new rules that will require platform operators in the passenger transport and short-term tourist accommodation sectors, such as Uber or Airbnb, to be responsible for collecting and remitting VAT to tax authorities when service providers do not in order to avoid an unfair advantage over taxis and hotels.

The agreement on this file, which required the unanimity of the Twenty-Seven, was previously thwarted by the reluctance of Estonia, which considered that the burden of the new rules would not fall on the platforms, but on small and medium-sized enterprises (SMEs) providing their services through them.

To bridge the gap, the ministers introduced, under the Hungarian presidency of the Council, some changes to reduce the administrative burden imposed by the regulation on SMEs.

“We have reached a good compromise on the two pillars we agreed on from the beginning and now we also appreciate the results on the platform economy,” conceded the Economy Minister of Estonia, Jürgen Ligi, who supported the compromise text on Tuesday.

In addition, a transition period has been added that delays the implementation of the regulation, which will be voluntary from July 1, 2028 and mandatory from January 1, 2030, which delays the original proposal of the European Commission by five years.

The European Commissioner for Economy, Paolo Gentiloni, celebrated the agreement, which has taken “time and effort”, although he emphasized that “the timely and consistent implementation of the rules would greatly benefit the functioning of the single market and the level playing field between traditional businesses and the platform economy” and that “the public finances of all member states would also benefit from a quick entry into force”.

For its part, the Spanish delegation included a statement supporting the general approach reflected in the proposal regarding the digital platform model, but expressed its intention to apply it before 2028, as a measure to simplify VAT collection and as a way to improve the fight against fraud.

According to current VAT rules, it is the underlying service providers – for example, the person renting out their apartment – who are obliged to collect and remit VAT to the Treasury, but many of them, whether individuals or small businesses, are unaware that they may be subject to VAT for the services they provide and even when they are aware, it can be difficult for them to become familiar with the VAT system and comply with their obligations in this regard.

Thus, this reform aims to eliminate the current inequality in VAT matters suffered by traditional operators in these sectors and, according to Brussels’ estimates, this change could bring member states up to 6.6 billion euros a year in additional revenue over the next ten years and up to 48 million a year for the platforms themselves over the same 10-year period.

Now that the capitals have reached an agreement after two years of negotiations, the European Parliament will be consulted again on the agreed text, which will then have to be formally adopted by the Council before being published in the Official Journal of the EU and coming into force.

As part of the same package, it is also intended to boost e-invoicing in cross-border operations to help reduce VAT fraud by up to 11 billion euros a year and decrease administrative and compliance costs for EU traders by more than 4.1 billion annually over the next ten years.

This legislative proposal aims to modernize the current EU VAT system for intra-community trade, which, at almost 30 years old and despite some recent improvements, has not kept pace with technological advances, the digital economy, changes in business models, or globalization.

The third pillar of this package is a “one-stop shop” model to allow businesses selling to consumers in another member state to register once for VAT purposes throughout the EU, and meet their tax obligations through a single online portal in a single language, a measure that could save businesses about 8.7 billion euros in administrative and registration costs over the next decade. (November 5)

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